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America's Cup

There has been yet another twist in the legal saga surrounding the holding of the America's Cup. The New York Supreme Court, Appellate Division handed down a decision on 29 July, reversing a lower court decision and declaring a challenge by the Alinghi-sponsored Spanish yacht club, Real Federation Espanola de Vela (CNEV).

Seemingly, by overturning the earlier decision brought about by a challenge by Larry Ellison's Oracle-BMW syndicate, and reinstating CNEV as the official challenger in the next America's Cup, a significant legal victory has been handed to Alinghi.

Central to the Appellate Court's decision was its finding that CNEV was organised as a yacht club at the time of its challenge, the appeals panel wrote in the 3-2 decision.

At the heart of the Oracle-BMW legal proceedings was a play to determine the method, timing and venue for the next America's Cup challenge. By handing victory in the off-the-water contest to Alinghi, the Appellate Court enables CNEV to proceed to organise a multi-challenger series with CNEV as the "challenger of record". Amongst other things, the challenger of record is able to determine the type of boat to be used for the series.

The lower court hearing had declared Oracle-BMW as the challenger of record and required the America's Cup to be held in March 2009 in Valencia, Spain, or at another location chosen by Alinghi as a best-of-three, head-to-head series. Such a series would have been a departure from the traditional multi-boat competition to determine a challenger that had been a feature of past America's Cups.

Apart from seeking to reinstate the challenger series and thereby preserve the opportunity for 10 other teams to participate, Alinghi also appealed the earlier ruling because it sought to have a later race date.

Oracle-BMW is said to be taking legal advice and considering its next step. As a result it seems likely that there will be further legal skirmishing before any signs of activity on the water. Apart from the disruption to the teams, it seems hard to believe that the contestants would risk jeopardising an opportunity to capitalise on the most watched America's Cup ever, in Valencia, by continuing with an ugly and protracted legal fight.

Rugby: Air New Zealand Cup

The recent media reports on the New Zealand Rugby Union's review process of its flagship domestic competition, the Air New Zealand Cup, and the suggestion of a breakaway competition must seem very familiar to a number of our national sporting codes.

While it is understood that NZRU is about to unveil a new format for the Air New Zealand Cup, with a reduction in the number of teams for 2009, the media suggest that a group of provincial unions have proposed a 14-team trans-Tasman competition and a "Heineken Cup-style tournament" to replace both the Air New Zealand Cup and the Super 14. Such a proposal would appear to have significant implications for the NZRU's existing commitment to its Sanzar partners. Press reports suggest that the group of provincial unions formed an e-mail group and have reached a consensus on a number of common principals about the shape of professional rugby competition in the short to medium term.

The NZRU has publicly stated that it has no plans to break away from Sanzar and is currently looking at an expansion of the Super 14 with South Africa involved. There may however be a number of other catalysts for change, including a pending review of the Sanzar television rights contract, with Sanzar being required to present its product offerings in terms for international competitions beyond 2010 to News Limited by 2009. Also relevant will be a desire to address the risks presented by the financial muscle of the European clubs and concerns being expressed about the strength of Northern hemisphere sides being selected to play international fixtures.

Some of the drivers influencing the discussions between the NZRU and provincial unions about the future shape of domestic competitions will be familiar to a number of other sports facing concerns about such issues as preparing for international competition, retaining audience attention and the spiralling costs of competition. A number of these factors have prompted changes to domestic netball competition and reviews of the competition structures of many of our major sporting codes.

A number of those codes will be watching the developments in the rugby community with interest, no doubt hoping they can share some of the learning developed through the interaction between the NZRU, provincial unions and Sanzar.

Call to impose limits on Sky TV

Submissions earlier this year by TVNZ on a government review of broadcasting regulation to limit Sky TV's dominance of sports broadcasting appear to have the backing of Cabinet Minister Jim Anderton.

TVNZ's submission in May of this year to a Ministry of Culture and Heritage Ministry review said that sport is critical to our national identity and regulatory intervention was needed to prevent Sky TV penalising sports fans by allowing it to "hoard" big events and charge subscribers a "sports tax" for access to them. In its submission, TVNZ also suggested that Sky TV has a virtual monopoly on coverage of major events.

TVNZ's suggestions for arresting this situation included a proposal that Sky TV be split up into a number of separate businesses including one to make and buy programmes, and another to manage Sky TV's satellite transmission network.

About 720,000 householders subscribe to Sky, which has the rights to all major rugby test matches, cricket, soccer, racing, golf, basketball, rowing and athletics. TVNZ says that more than 80 per cent of all locally-produced television sports content is broadcast on Sky TV. Its submission called for rules to stop Sky TV buying exclusive rights to events of "national importance" – much like the "anti-siphoning laws" adopted in Australia in 1992, which enabled free-to-air television to get first rights to such events.

Progressive leader Jim Anderton called for legislation in 2001 to protect New Zealand's "icon events". In a recent public statement he appeared to endorse TVNZ's submissions. Specifically, Anderton noted that a generation of young Kiwis was growing up without watching live cricket and rugby because they could not afford pay-TV, resulting in a loss of rugby and cricket audiences and the knock-on effect of fewer children playing rugby and cricket.

Sky TV's submissions to the review noted its significant investment in pay-TV, which was made on the basis of existing legislation. It said that a change would threaten further investment by the company.

Stadium strategies

Discussions about sports stadiums seem to be a sure fire way to galvanise, and polarise, public opinions. Witness Auckland's Waterfront Stadium debacle in the lead-up to the Government decision to approve funding for the revamp of Eden Park and the present, hotly contested debate in Dunedin about the merits of upgrading Carisbrooke versus the proposed new Awatea Street Stadium.

It is refreshing to see that New Zealand is not alone in wrestling with these issues. Debate is raging in Sydney about the need for a state-wide stadium strategy in the face of an outbreak of stadium development proposals for replacements, additions, and renovations to stadium facilities - almost all of these proposals require some form of taxpayer funding. Government grants have been handed out for upgrades to a number of Sydney's best-known rugby league stadiums and numerous renovations are said to be likely to complicate the irrational spread of football stadiums in the greater Sydney region.

This is on top of the amount ploughed into the under-utilised ANZ Stadium at Homebush Bay, the main venue for the Sydney Olympics. As an aside, the city of Montreal has recently celebrated a significant milestone, with the result that Montreal's Olympic Stadium needs a new nickname — the Big Owe no longer applies because the debt from the 1976 Olympics has finally been paid off , three decades after the Games.

The NSW state Government has been criticised for not having a venue management strategy. This is said to have been exploited by a number of sporting codes, including AFL and cricket.

The approach in New South Wales is being contrasted with that of the Queensland Government, which has recently funded a renovation of Brisbane's famous Gabba ground and included accommodation for additional teams to use the Gabba as their home ground, coupled with commitments from the teams themselves to do so. The Queensland Government also declined to fund a further stadium for AFL to compete with its facilities.

One of the seemingly unanswered questions arising out of the Waterfront Stadium debate relates to the need to better utilise existing facilities. The question becomes even more apparent when indoor facilities are examined. Apart from Dunedin's widely acclaimed Edgar Centre, many of our main centres lack multi-use facilities of adequate size and layout to meet the growing demands of users close to town centres and major transport hubs. Plans are underway for developments in Hamilton and Tauranga, and Wellington is about to get a new multi-use facility (Te Rauparaha Arena), albeit located in Porirua. However, Auckland appears to exemplify the problems of a shortage of well-planned multi-use facilities with ready access to transport.

Industry experts suggest that new greenfields facilities will require areas in excess of four hectares to house the facility, parking and associated services. As a result, the price of the land alone may be out of the reach of most sporting codes and funding agencies in many of our larger centres. Economics and better planning for community use and access may require a re-think about the use of either existing stadiums or better utilisation of community-owned land in the CBD. Perhaps a few more cargo sheds at port facilities could be re-used for the surrounding community.

A Waterfront Stadium Mark II anyone?

Sonny Bill Williams

The fact that Sonny Bill Williams has taken up a contract to play rugby in France in itself is not unusual. In recent times, we have witnessed an exodus of professional rugby and rugby league players to Europe where leagues pay players at rates significantly higher than they would expect to receive in Australasia.

What was not expected, however, are the lengths to which the National Rugby League and the Bulldogs Leagues Club have gone to enforce contractual obligations which each of them had with Williams.

The facts of the case are well known. Williams had a five year contract with the Bulldogs. After one season he secretly left Australia, evaded attempts by the Bulldogs and the New South Wales Supreme Court to contact and serve documents on him, and took up a contract with the Toulon Rugby Club in France. Williams' contract with the Bulldogs included a restraint preventing him from playing any form of football code for any other team during the term of his contract.

The court granted the injunction, but it did not have the initial effect sought by the NRL and the Bulldogs, as Williams played in a game in France on the same day. However, the basis on which the court made the injunction against Williams demonstrates the lengths the courts will go to to enforce what it terms the "sanctity of contract".

In the context of professional sports contracts, two pertinent points arise from the case. First, the court identified that, on the evidence before it, there was a high probability that Williams intended to breach his contractual responsibilities. However, a fact new to the general public is that the Bulldogs argued the contract with Williams was still "on foot" – meaning that the Bulldogs were willing to continue to pay Williams and to select him to play if he returned.

In essence, this meant that no argument could be made that, by making an injunction, the court would be ordering Williams to return to Australia and perform his employment contract - something which the courts have a stated reluctance to do - as such an order is akin to slavery (a view Christiano Ronaldo would support).

The second matter is around the "special nature" of Williams' employment with the Bulldogs. The court specifically identified the potential negative repercussions for the Bulldogs if he suffered an injury playing for Toulon, and that the Bulldog's recruitment strategy and its ability to compete in the NRL was hampered by his absence. The court recognised the Bulldog's sponsorship was heavily based on Williams, the salary cap limited the Bulldog's ability to pay other players to play in his position, and his "star attraction" all indicated that the restraint preventing him from playing another code or for another team was reasonable.

The inevitable conclusion is that, in respect of the exodus of players offshore, the courts have delivered professional sports clubs a strong decision from which they can argue for the retention of their marquee players who might seek to break their contracts

However, Williams' actions breaching his contract and avoiding court processes, mean that some element of deceit would probably need to be demonstrated.

An interesting aspect to this whole case (although not mentioned at all in the judgment) is the prospect of Williams challenging the NRL's salary cap as being, in itself, a restraint of trade. In the context of a proceeding for the grant of injunction, the salary cap had no relevance. However, a challenge of this sort has the real prospect of displacing the entire basis upon which the NRL (and professional sports organisations in Australia) engage players, but might be a de facto way of equalising salaries paid for professional sports Down Under. Such salary cap issues are unlikely to arise in New Zealand. When a salary cap was agreed to between the New Zealand Rugby Union and the Rugby Players Association approval was sort, and granted, by the Commerce Commission for a period of five years (although, due to the potential changes in the Air New Zealand cup competition, this might need to be reviewed).

In breaking news, yesterday the Bulldogs accepted a $750,000 cash settlement in return for the release of Sonny Bill Williams, effectively bringing the case to an end.

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Bell Gully manages issues such as sponsorships, player contracts, financing, merchandising, disciplinary hearings and constitutional issues. Our clients include the country's leading sporting teams, players and organisations.

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